Ahead of listing, Ambit Capital has initiated coverage on Lenskart with a sell rating, flagging valuation concerns even as the eyewear retailer continues to deliver strong revenue growth and expand its domestic and global footprint.
The brokerage flagged a sharp disconnect between the company’s growth prospects and its return ratios.
Ambit expects Lenskart to clock nearly 20 per cent revenue CAGR between FY25 and FY28, driven by continued expansion in India and growing scale in international markets. The firm anticipates margin gains, with gross margin improvements and operating leverage contributing to an estimated 630 bps expansion in Pre-Ind AS 116 EBITDAM (450 bps on a proforma basis).
However, the brokerage highlights structural challenges in scaling a made-to-order category such as eyewear. Capacity expansion and the company’s heavy goodwill base, Ambit notes, will continue to weigh on the balance sheet.
With plant utilisation at around 65 per cent versus 80 per cent for most retail categories, Lenskart will require significant capital investment to sustain growth momentum. Ambit projects ₹20 billion in capital expenditure over FY25–28, which could keep free cash flow negative until FY28.
While Ambit acknowledges Lenskart’s higher growth profile compared to most retail peers, it believes the valuation premium is difficult to justify. At the current market price of ₹402, Ambit estimates the stock implies an 18 per cent compounded revenue growth over two decades, effectively pricing in nearly 60 per cent of EssilorLuxottica’s current market share in retail eyewear.
At this valuation, Lenskart trades at roughly 55x FY28E Pre-Ind AS EV/EBITDA for its India business — a 15–30 per cent premium to high-growth peers such as Trent and Nykaa’s beauty and personal care segment.
Yet, the company’s return on capital employed (RoCE) of 9 per cent and return on invested capital (RoIC) of 13 per cent lag well behind peers’ 35–40 per cent range despite similar growth trajectories.
Ambit’s target price of ₹337 implies 45x and 22x EV/EBITDA multiples for the India and international businesses respectively. The brokerage said potential upside risks to its call include stronger-than-expected same-store sales growth in India and improved profitability in international operations.
Ambit’s analysis suggests that while Lenskart’s growth story remains intact, the current market valuation leaves little room for error, making risk-reward unfavourable at current levels.
Shares are set to debut on bourses on November 10, 2025.